Cleaning bills

I was thrilled of course to read the announcement from the Solicitors Regulation Authority (“SRA”) earlier this week that costs of intervention will be met from the Compensation Fund. 

This debate has surfaced following high profile failures of large legal firms like Cobbetts, Atteys and Blakemores at the start of this year. Insolvencies are linked to the increasingly tough climate generally and within legal services. The ridiculous and conniving assault by government and insurers on personal injury costs is but one element of it. 

For anyone who does not immediately recognise the problem, it is this. When any legal firm goes bust, there is a huge clean-up operation to be undertaken. Out in the real world, commercial transactions and personal lives continue. Even litigation matters continue with an almost independent existence, notwithstanding the pig’s ear of a court service that we now seem to have. 

Somebody’s got to identify those matters and deal with them. Clients and third parties have to be contacted and the situation explained. Many won’t even know what has happened. 

Old files need to be dealt with, deeds and wills moved elsewhere whilst the infrastructure of premises, staff etc is collapsing. 

Somebody has to be paid to do it. There are big legal firms with the experience and the resources who will be wheeled in and make it alright – but they need to be paid. 

It’s not cheap. The costs may run into millions of pounds. I’ve seen one estimate of £6,000,000 for the intervention that would have happened if Cobbetts had not been rescued by DWF, the firm that had previously courted a merger. 

So, where is the money coming from to pay for the emergency services? 

Answer - me and thousands of other solicitors who (hopefully) have been cautious and prudent in the way that they run their business. 

At first the SRA were contemplating a direct levy on the rest of the profession but now it is going to come out of the Compensation Fund, to which we all contribute every year as part of the price for a practising certificate – our licence to trade as a solicitor. 

I already paid a disproportionate contribution last year. As the sole solicitor owner of a business, I get to pay the same level of contribution as is levied on Slaughter and May, Irwin Mitchell and thousands of others who are very much bigger. That was enough of a kick in the nuts already (Regulation issue). 

Now it seems that the contribution is going to be loaded still further with the cost of other failed firms. I express no view on those named or generally that have gone before. Misfortunes can happen. 

In the main, though, it may be said that failures come as a result of poor management and unacceptable risk taking. Certainly that is view that the SRA have said they are going to be taking in future when rating the stability of practices. 

I confess that I feel resentful about having to pay for the costs of cleaning up the mess left by people who chanced it too far to complete with me amongst others, probably on price more than anything. Their aim, if not achievement, is to take the business, trouser the profits and then send me and others the bill when eventually it falls over the edge. 

Let’s take as an example of the sort people I expect to be adding to this burden - a firm from which we have recently taken over a road traffic injury claim. I’ll be no more specific than to say that they are hundreds of miles away from here (Panel Beater). 

Our client lives half a mile down the road from my office. He was of course steered away to this firm by his legal expenses insurers to whom he had paid a premium for dealing with claims arising out of an accident such as happened in early 2010. 

In return those insurers dumped the administration of the claim on the “expert” panel lawyers who were appointed, and trousered £825 for the claim which they all thought at the time would be worth £1,350 in fees. 

Does it show that these people blew more than 60% of the revenue from the case just to acquire it? You bet. It's apparent from looking at the file that with the Peanuts left they can only afford to employ staff who:- 

• Think that specific instructions to invite an offer from defendants insurers equates to making a liquidated offer that isn’t discussed with or even notified to the client; 
• Can’t find a prognosis in a medical report that says the claimant's condition has plateaued and he will see no improvement or deterioration in the future; 
• Generally seem to have trouble with reading and writing, let alone comprehension. 

This is dumbing the legal process down almost beyond the stage of mere grunting. It's shameful. 

I don’t want to pay to clean up the failures of these people. They simply shouldn’t be here. They’re purely a product of insurers’ “efficiency”. 

The SRA needs to act now, within the budget it should have for proper regulation of the profession and which it has been working on for many months. It needs to take effective action to close the cowboys down now, and make them clean up their own mess behind them.